Showa Packard Case Essay

Submitted By Kaprikon1
Words: 3628
Pages: 15

SHOWA-PACKARD, LTD.

When Richard Johnson, president of the International Division of Packard Foods, Inc. got on a JAL flight from JFK airport to Tokyo, he was still undecided as to how best he could approach several delicate issues with the Japanese company which was a joint-venture partner. He planned to make good use of the grueling eleven-hour flight to Tokyo to formulate his policy. In many ways, he considered this trip of vital importance. For one thing, the nature of the problems to be discussed was such that they were likely to affect the long-term relationship between the Packard company and the Japanese partner in the management of their joint venture in Japan. Moreover, this was his first trip to Japan in the capacity of president of the International Division and he was anxious to make a good impression and to begin to build a personal relationship with senior executives of the Japanese firm.

Mr. Johnson had assumed the position of president several months previously. He was forty-two years old and was considered to be one of the most promising senior executives in the company. He had graduated from a well-known eastern business school in 1954. After two years of military service, he had entered a prominent consulting firm. In 1959, he joined the marketing group of Packard Foods, Inc. Prior to his promotion to the presidency of the International Division, he served as managing director of Packard’s wholly owned subsidiary in Great Britain.

Packard was a major manufacturer of breakfast cereals, canned products, instant coffee, frozen foods, and pet foods. The company’s total sales for 1972 were roughly $1.5 billion and it had 15 manufacturing subsidiaries and 20 sales subsidiaries throughout the world. International operations, including exporting, accounted for roughly 25% of the company’s total sales. International sales had been growing at a rapid rate during the previous decade and the company’s top management felt that this represented a major thrust for future growth.

The company, after about two years of difficult and often frustrating negotiations, was successful in establishing a joint venture in Japan with Showa Foods, a leading Japanese foods manufacturer. The arrangement was formalized in the summer of 1971 and the venture went into operation in the spring of the following year.

Prior to the establishment of this joint venture, Packard had had limited export operations in Japan through a major trading company, but the company’s management recognized that in order to capitalize on the rapidly growing Japanese market for processed foods, the changing diet pattern, and the emerging mass market, more extensive local presence was essential. By the late 1960s, the company began to receive a number of inquiries from major Japanese corporations concerning licensing as well as the possibility of establishing a joint manufacturing venture.

Showa was one of the companies that approached Packard initially for licensing. It appeared to be an attractive potential partner. Showa Foods, Inc. had been a major producer of canned fish. In the early 1960s the company began an active program of diversification into new food products. The company successively entered into new product fields, including ketchup, mayonnaise, salad dressing, and a number of other lines. The company had established a reputation for high quality, and its brands were well established. Moreover, the company had built one of the most effective distribution systems in the industry, using a myriad of wholesalers and small retailers.

In the late 1960s, Showa began to seek still more new products. It was particularly interested in breakfast cereal, nondairy coffee creamer, canned soup, frozen foods, and pet foods. The company’s management felt that these products would be a field for major growth. The management, after some investigation concluded that the quickest and most efficient way to achieve entry into these…